Helping create jobs would mean "cutting tax rates and red tape, backing scientific advance, building new roads and broadband" and making the UK an attractive investment option, he said.

However he warned of "more tough choices" to be made on further slashing public spending from 2015 - with the scale of the squeeze to be unveiled in his statement.

"It won't be easy," he warned, amid rows between ministers over where the axe should fall.

Hopes the economy could grow in this quarter and thus avoid returning to recession were dealt a blow this week by a 1.5% fall in manufacturing output in January.

Former cabinet minister Liam Fox is leading Tory calls for a change of course - suggesting Corporation Tax be reduced to zero and far bigger cuts to public spending, notably welfare.

Other prominent backbench demands include cancelling a fuel duty rise due in the autumn and scrapping the beer duty escalator that automatically ups the price of a pint.

Osborne is tipped to announce extra investment in housebuilding and road projects - called for by leading business groups - and help for people to buy homes.

But he will not abandon "Plan A" by increasing borrowing to fund it - a move being floated within the coalition by Liberal Democrat Business Secretary Vince Cable.

Shadow chancellor Ed Balls said he would welcome extra borrowing to fund a cut in the basic rate of income tax to put more money into people's pockets.

But Osborne hit back: "I think the British people know there are no easy answers in today's world. They aren't fooled by the miracle cures peddled by the same snake oil politicians who got us into this mess.

Budget 2013: George Osborne Warns Of 'Tough Choices' But Will Not Change Course On 'Austerity'

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The Chancellor said the fresh round of reductions would be made "carefully, protecting the things people most depend on like the NHS and pensions" and fairly.

But he said it would mean "mean more tough choices in the months ahead" and stressed that there was still a need to "fix welfare" by cutting the cost of benefits.

"But it's the right thing to do because the alternative would be so much worse," he said.

"If the world thought we didn't have the resolve to stay the course then interest rates could soar - businesses would go bust and families would lose their homes, destroying people's dreams and aspirations. Our children would end up paying for our debts and even more, and we'd end up spending many billions more just on the interest payments we'd owe to the rest of the world."

"I want to take forward Michael Heseltine's inspirational ideas on how to put local communities and businesses back in control of how money is spent in their area," he said of the Tory former cabinet minister's review.

"What he achieved in Liverpool or London's Docklands can be a model for our whole country."

One Budget measure already announced is the closure of a tax loophole which allows firms to dodge around £100 million a year in National Insurance payments.

Around 100,000 employees - mostly teachers, nurses and oil and gas workers - are believed to be paid via offshore payroll services and could be unknowingly ineligible for statutory sick pay.